Why choose only one market

Different markets have different characteristics. When these are identified, the trader can develop an edge, as well as statistics to help build some simple rules around. We call these rules a trading plan.

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A trading plan in one market may not be applicable to an unrelated market.

So a recommendation to focus on one market is the starting point. This will take away a lot of the unrelated noise associated with other markets and allow the trader to understand the characteristics of the chosen market.

It’s also important to note markets differ in the rate of movement. Commodities markets can move to extreme ranges of 5 and 6 percent per day, whereas the FX market is far less volatile 95% of the time. FX volatility can, however, move to extreme levels around economic announcements.

In a leveraged market, this can be very detrimental to a trader’s money management, and should therefore be investigated during research for a rule-based trading plan.

It’s always better to be aware of the risks to your trading account than surprised. And remember that what applies in one market may not in another.

Trading periods

Trading activity periods can differ greatly in markets. The AUD/USD FX cross is the most active in the Asian day session, while gold can be most active during the European and US market opens.

You need to be able to follow your trades during active market times and stick to your own rule-based plan.

For example, a trading plan based around an intraday time frame using 1 hour charts would require attention at each hourly change period to reset stop levels or place new orders.

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